EUR/USD: bias remains unchanged following the NFP report and ahead of Wednesday's CPI figures

The two major macroeconomic and monetary events of the past week have only confirmed the bullish bias of the dollar against the euro.

The NFP (Non Farm Payrolls) report focused attention. The report was very good, confirming the continued improvement in the health of employment in the US, without showing a higher than expected increase in wages. The Bureau of Labor Statistics reported a sharp rise in private sector job creation to 530,000, compared with 195,000 in September. Moreover, the unemployment rate continued to fall, to 4.7% of the population, beating the target.

As a reminder, the Fed completed a new meeting of its Monetary Policy Committee (FOMC) earlier this week. By insisting on the transitory nature of the price hike, the Federal Reserve certainly confirmed its commitment to a reduction in its asset purchase policy, but showed no signs of rushing to raise rates per se.

For Vince Manuel, Investment Director at Indosuez Wealth Management, during the Q&A session, "Jerome Powell reiterated a certain detachment from the September dot plots by indicating that rate hikes had not been the subject of debate... for the moment. One way to interpret this is to remember that Jerome Powell does not intend to commit to a rate hike at the same time as the tapering which is due to end in July at the announced pace. This therefore leaves the door open for a rate hike at the end of next year."

"However, expectations outside the Fed point to a possible rate hike as early as next June, justified by persistent inflation" notes Vince Boy (IG France). J. Powell had also acknowledged that inflation could be less transitory than expected and that it should exceed the Fed's initial expectations. Thus, to justify the continuation of this low rate policy, the Fed indicated that it was monitoring the labour market, which still requires a significant improvement before changing rates.

On the subject of US inflation, this week traders will be paying close attention to the publication of the CPI (consumer price index) in the United States tomorrow at 14:30. This is undoubtedly the statistical highlight of the week, at least for the currency pair that interests us here. Any stronger than expected heating up would reinforce expectations of a tightening of the Fed's tone. Currency traders will be watching a Fed conference call on Monday, during which Fed Chairman J. Powell will speak. Even if the theme is "angled" (gender and the economy), the trading rooms will be sure to pick up on the broader clues about future monetary policy.

In the immediate term, the Euro was showing some resistance above a fragile floor, thanks to a much better than expected release of the Sentix Eurozone investor confidence index.

Right now, the pair is trading at $1.1589.

KEY CHART ELEMENTS
The break of the 20-day moving average (in dark blue), now confirmed on 29/10 in daily data, and in an outburst of volatility, whose bearish orientation is accentuated, invites traders to resume their bearish initiatives on the EUR/USD. First target locked at $1.1360, second at $1.1150. A break of a fragile support zone at 1.1530 would increase volatility. The working band between $1.1530 and $1.1675 would then be obsolete.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the EUR/USD is negative.

Our entry point is $1.1582. The price target of our bearish scenario is $1.1361. In order to preserve the capital invested, we advise you to place a protective stop at $1.1631.

The expected return on this forex strategy is 221 pips and the risk of loss is 49 pips.